Article
6. California Jumpstart Act
12264.
This article shall be known, and may be cited, as the California Jumpstart Act.12264.5.
As used in this article, the following definitions apply:(a) “Affiliate” means an entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another entity. For purposes of this subdivision, an entity is “controlled by” another entity if the controlling entity holds, directly or indirectly, the majority voting or ownership interest in the controlled entity or has control over the day-to-day operations of the controlled entity. For purposes of subdivision (c) of Section 12265, “affiliate” shall include only taxpayers that satisfy this definition on the date the relief fund submitted its application.
(b) “Closing date” means the
date on which a relief fund has collected all amounts specified in subdivision (a) of Section 12268.
(c) “CPCFA” means the California Pollution Control Financing Authority within the office of the Treasurer.
(d) “Federal funds rate” means the effective federal funds rate, as measured and published by the New York Federal Reserve Bank.
(e) “Flexible term” means any of the following:
(1) Deferral of interest payments for at least one year.
(2) Deferral of principal payments for at least one year.
(3) Convertible into equity.
(f) “Impact business” means a small
business more than 50 percent owned by minorities, women, disabled veterans, lesbian, gay, bisexual or transgender persons, and other disadvantaged groups identified or approved by the CPCFA.
(g) “Investment authority” means the amount certified by the CPCFA pursuant to Section 12267.
(h) “Premium taxes” means the taxes imposed by paragraph (3) of subdivision (f) of Section 28 of Article XIII of the California Constitution, or as specified by Section 12221 of this code, or Section 685 of the Insurance Code.
(i) (1) “Principal business operations” means the location that meets either of the following requirements:
(A) At least 60 percent of the business’s employees work at the location.
(B) Employees who are paid at least 60 percent of the business’s payroll work at the location.
(2) A business that has agreed to use the proceeds of a relief investment to establish its principal business operations in the state shall be deemed to have its principal business operations in a relief zone if it satisfies the requirements of paragraph (1) within 180 days after receiving a relief investment.
(j) “Relief contribution” means an investment of cash, by an entity subject to premium taxes in this state, in a relief fund that equals the amount specified on a notice of tax credit allocation issued by the CPCFA under subdivision (c) of Section 12267 and that is used to purchase an equity interest in the relief fund or to purchase, at par value or premium, a debt instrument issued by the fund that meets both of the
following requirements:
(1) Has an original maturity date of at least five years after the date of issuance.
(2) Has a repayment schedule that is not faster than a level principal amortization over five years.
(k) “Relief fund” means an entity certified by the office of the CPCFA under subdivision (a) of Section 12267.
(l) (1) “Relief investment” means any capital or equity investment in a small business or any loan to a small business with a stated maturity of at least two years.
(2) A senior secured loan is a relief investment only if it has an interest rate of less than 4 percent plus the effective federal funds rate as measured and published by the New York
Federal Reserve Bank and has a flexible term.
(3) Any other loan is a relief investment only if it has an interest rate of less than 9 percent plus the federal funds rate and has a flexible term.
(4) An equity investment is a relief investment only if the relief fund does not acquire a majority investment in the small business as an initial investment in the small business.
(5) “Relief investment” does not include any transaction that includes an origination fee.
(m) “Relief zone” means any of the following locations in this state:
(1) A census tract in the state meeting either of the following requirements:
(A) The census
tract has a poverty rate that is greater than 20 percent.
(B) The census tract has a median family income that does not exceed the following:
(i) If the census tract is not located in a metropolitan area, the statewide median family income.
(ii) If the census tract is located in a metropolitan area, the greater of the statewide median family income and the metropolitan area median family income.
(2) All locations in the state but outside of census places with a population greater than or equal to 50,000 as of the latest decennial census and their adjacent and contiguous urbanized areas.
(3) A High Unemployment Area (HUA) in the state as designated by the Employment Training Panel at the
time a relief fund initially invests in the business.
(n) “Senior secured loan” means any loan that is secured by a first mortgage on real estate with a loan-to-value ratio of less than 80 percent.
(o) “Small business” means any business that, at the time a relief fund initially invests in the business, meets all of the following requirements:
(1) The total number of employees the business has does not exceed 250.
(2) The business has gross receipts, less returns and allowances reportable to the state, of less than ten million dollars ($10,000,000) during the previous taxable year.
(3) The business has its principal business operations in a relief zone in the state.
(4) The business is engaged in North American Industry Classification System sector 11, 22, 23, 31, 32, 33, 42, 44, 45, 48, 49, 51, 54, 56, 62, 71, or 72, or if not engaged in those industries, the CPCFA determines that the investment will create desirable economic outcomes in line with the goals of this article.
(5) “Small business” shall not include any trade or business consisting of the operation of any private or commercial golf course, country club, massage parlor, sauna or hot tub facility, sun tan facility, racetrack, facility primarily used for gambling or to facilitate gambling, liquor store, a store or other facility whose principal business is the sale of firearms, a shooting range or gallery or a business which presents live performances of a prurient sexual nature or derives directly or indirectly more than de minimis gross revenue through the sale of products or
services, or the presentation of any depictions or displays, of a prurient sexual nature.
12265.
(a) For taxable years beginning on or after January 1, 2024, there shall be allowed against premium taxes a California Jumpstart Act tax credit in an amount equal to the amount of a relief contribution, eligible for utilization in accordance with paragraph (2) of subdivision (a) of Section 12269.(b) If the credit allowed by this section exceeds the taxes described in subdivision (a), the excess may be carried over to reduce those taxes in the following year, and the four succeeding years if necessary, until the credit is exhausted. Tax credits shall not be carried forward after the 2031 taxable year.
(c) The credit is nonrefundable and may not be sold, transferred, or allocated
to an entity other than an affiliate.
(d) No additional retaliatory tax shall be required as a result of receiving the tax credit described in this subdivision.
(e) A taxpayer claiming a credit under this section shall submit a copy of the tax credit certificate issued pursuant to subdivision (a) of Section 12269 with the taxpayer’s return for each taxable year for which the credit is claimed.
(f) (1) The aggregate amount of investment authority that may be certified shall be three hundred seventy-five million dollars ($375,000,000) and the aggregate amount of credit that may be allocated and certified pursuant to this section shall be three hundred million dollars ($300,000,000) in total for all taxable years for which the California Jumpstart Act tax credit is authorized.
(2) The total amount of credits that may be claimed per year is seventy-five million dollars ($75,000,000) during the taxable years containing the third through sixth anniversaries of the closing date.
(3) If requests for investment authority and credits exceed the limitations described in paragraph (1), the CPCFA shall proportionally reduce the investment authority and credits certified for each approved application as necessary to avoid exceeding the limit.
12266.
(a) Beginning 90 days after the enactment of this act, the CPCFA shall accept applications for entities desiring to apply for certification as a relief fund. The application shall meet all of the following requirements:(1) The application shall state the total relief investment authority sought by the applicant, which shall not exceed three hundred seventy-five million dollars ($375,000,000).
(2) The applicant shall include evidence to prove, to the satisfaction of the CPCFA, that the applicant meets all of the following criteria:
(A) The applicant, or an affiliate of the applicant, is a federally approved or
licensed rural business investment company pursuant to Section 2009cc of Title 7 of the United States Code or a small business investment company pursuant to Section 681 of Title 15 of the United States Code. The applicant shall include a certificate executed by an executive officer of the applicant attesting that the approval or license remains in effect and has not been revoked and evidence that at least one principal or similar officer of the entity is, and has been for at least four years, an officer or employee of the applicant or an affiliate of the applicant on the date the application is submitted.
(B) As of the date the application is submitted, the applicant and its affiliates have invested more than one hundred million dollars ($100,000,000) in small businesses. As used in this subparagraph, a “small business” is not required to have principal business operations in California.
(3) A signed certification from the chief executive officer, or similar officer, of each investor that commits to make a relief contribution to the applicant stating the amount of that commitment.
(4) The sum of all relief-eligible capital contribution commitments described in paragraph (3) of this subdivision, which shall equal at least 80 percent of the total investment authority sought by the applicant.
(5) A nonrefundable application fee of ten thousand dollars ($10,000).
(6) A detailed inclusive outreach plan intended to increase investment sourcing opportunities under the program in impact businesses.
(b) (1) Except as provided in paragraph (2) of this subdivision, the CPCFA shall review and make determinations
with respect to applications within 30 business days of receipt. Applications received by the CPCFA on the same day shall be deemed to have been received simultaneously.
(2) The CPCFA shall approve investment authority only in an aggregate amount that is not greater than three hundred seventy-five million dollars ($375,000,000).
(c) The CPCFA shall deny an application submitted under this section if any of the following apply:
(1) The application is incomplete.
(2) The application fee is not paid in full.
(3) The application does not satisfy all the criteria described in paragraph (2) of subdivision (a).
(4) The CPCFA has
already approved the maximum total relief investment authority and relief contributions allowed pursuant to subdivision (f) of Section 12265.
(5) The applicant fails to submit affidavits equal to 80 percent of the relief investment authority sought.
(d) The CPCFA shall not deny a relief fund application or reduce the requested relief investment authority for reasons other than those described in subdivisions (b) and (c).
(e) (1) If the CPCFA denies an application, the CPCFA shall notify the applicant of the reasons for denial. If the application was denied for any reason other than the reasons specified in paragraph (3), (4) or (5) of subdivision (c), the applicant may provide additional information to the agency to cure defects in the application, provided the information is submitted within 15
days of receipt of the notice of denial.
(2) If the CPCFA denies an application for certification as a relief fund, and approving a subsequently submitted application would result in exceeding the dollar limitation on relief investment authority or relief contributions if the previously denied application is completed, clarified, or cured pursuant to this subdivision, the CPCFA shall refrain from making a determination on the subsequently submitted application until the previously denied application is reconsidered or the 15-day period for submitting additional information for the previously denied application has passed, whichever comes first. If subsequently approved, the CPCFA shall treat the application as approved as of its original filing date.
12267.
After approving an application submitted pursuant to Section 12266, the CPCFA shall issue a written notice to the applicant certifying all of the following:(a) The applicant is a relief fund.
(b) The amount of the applicant’s investment authority.
(c) The relief contributions required from each investor that submitted an affidavit with the relief fund’s application.
12268.
(a) (1) Within 60 days after receiving the certification issued pursuant to Section 12267, a relief fund shall do both of the following:(A) Collect relief contributions equal to the amount certified in Section 12267 from each investor whose certification was included in the application.
(B) Collect additional investments of cash that, when added to the investor contributions, equal the relief fund’s investment authority.
(2) At least 5 percent of the relief fund’s investment authority shall consist of direct or indirect equity investments from affiliates of the relief fund, including employees,
officers, and directors of the affiliates.
(b) Within 65 days after receiving certification pursuant to Section 12267, the relief fund shall send to the CPCFA documentation to prove that the amounts required by subdivision (a) have been collected.
(c) If the relief fund fails to comply with subdivision (a) or (b), the CPCFA shall revoke the relief fund’s certification and provide written notice to the relief fund of the revocation.
12269.
(a) (1) Upon receipt of the documentation required by subdivision (b) of Section 12268, the CPCFA shall issue, to each investor or affiliate identified in subdivision (b) of Section 12268, a notice of the amount and utilization schedule of the tax credits allocated to that investor or affiliate as a result of its relief contribution.(2) The CPCFA shall issue, to each investor identified in subdivision (b) of Section 12268, a tax credit certificate for one-fourth of the relief contributions made by the investor for each of the taxable years containing the third through sixth anniversaries of the closing date.
(b) The CPCFA shall not be required to issue a tax
credit certificate if the relief fund does not invest 70 percent of its investment authority in investments within one year of the closing date and 100 percent of its relief investment authority in relief investments within two years of the closing date, subject to satisfaction of these investment milestones during the cure period established by Section 12270.
12269.5.
(a) An annual fee of one hundred fifty thousand dollars ($150,000), to be prorated amongst all relief funds that have not exited pursuant to Section 12271, shall be payable to the CPCFA.(b) The initial annual fee is due and payable to the CPCFA within 60 days after receiving the certification issued pursuant to Section 12267.
(c) After payment of the initial annual fee, the annual fee shall be due and payable to the CPCFA before the anniversary date of the closing date.
(d) Application and annual fees paid to the CPCFA shall be deposited in the Treasury Relief Investment Fund established under Section
12276.
12270.
(a) (1) The CPCFA may recapture tax credits claimed pursuant to Section 12264 and revoke the tax credit certificates issued if any of the following occur with respect to the relief fund:(A) The relief fund fails to invest 100 percent of its investment authority in relief investments within two years of the closing date.
(B) The relief fund fails to maintain that level of investment until the sixth anniversary of the closing date. For the purposes of this paragraph, an investment is maintained even if the investment is sold or repaid as long as the fund reinvests an amount equal to the capital returned or recovered by the fund from the original investment,
exclusive of any profits realized, in other relief investments in this state within one year of the receipt of such capital. Regularly scheduled principal payments on a loan that is a relief investment shall be deemed continuously invested in a relief investment if the amounts are reinvested in one or more relief instruments by the end of the following calendar year.
(C) The relief fund makes a distribution or payment that results in the fund having less than 100 percent of its relief investment authority invested in relief investments or in cash or marketable securities available for investment in relief investments.
(D) The relief fund makes a relief investment in a small business that directly or indirectly through an affiliate owns, has the right to acquire an ownership interest, makes a loan to, or makes an investment in the relief fund, an affiliate of the fund, or an
investor in the relief fund, excluding investments in publicly traded securities by a small business or an owner or affiliate of a small business.
(2) Before recapturing tax credits or revoking a tax credit certificate pursuant to this section, the CPCFA shall notify the relief fund of the reasons for the pending recapture or revocation. If the fund corrects the violations outlined in the notice to the satisfaction of the CPCFA within 90 days of the date the notice was dispatched, the CPCFA shall not recapture the tax credits or revoke the tax credit certificate, as applicable.
(3) The CPCFA shall not recapture a tax credit or revoke a tax credit certificate due to any actions of a fund that occur after decertification pursuant to Section 12271, provided the CPCFA may recapture a relief fund’s tax credits or revoke a tax credit certificate related to actions of the relief fund
that occurred prior to exit in accordance with Section 12271, even if the actions are discovered after exit.
(b) The amount by which one or more relief investments by a relief fund in the same small business exceeds seven million five hundred thousand dollars ($7,500,000) shall not be considered as a relief investment for purposes of this section, exclusive of capital repaid or redeemed by the small business and reinvested as a relief investment in the small business. A relief investment in an affiliate of a small business shall be treated as a relief investment in that small business for purposes of this subdivision.
12271.
(a) (1) On or after the sixth anniversary of the closing date, a relief fund that has invested 100 percent of its relief investment authority in relief investments may apply to the CPCFA to exit regulation by the CPCFA.(2) The CPCFA shall approve or deny an application made pursuant to paragraph (1) within 30 days after receiving the application.
(b) The CPCFA shall not deny the application unless there is a reasonable basis for the denial. In evaluating the application, whether a tax credit was recaptured with respect to the decertifying relief fund shall be evidence to prove that the relief fund is eligible for exit.
(c) The CPCFA shall send notice of its determination with respect to decertification and reasons for denial, if applicable, to the relief fund requesting exit.
12272.
(a) A relief fund may request a written opinion from the CPCFA as to whether the business qualifies as a small business.(b) The relief fund shall include evidence that the business satisfies the definition of a small business and a certification by an executive officer of the business attesting that the business satisfies such definition.
(c) The CPCFA shall issue a written opinion to the fund within 15 business days of receiving the request. If the CPCFA determines that the business qualifies as a small business or if the CPCFA fails to timely issue the written opinion, the business shall be considered a small business for purposes of this article.
12273.
(a) If the CPCFA revokes a relief fund’s certification pursuant to subdivision (c) of Section 12268 or revokes or recaptures a tax credit certificate pursuant to subdivision (b) of Section 12267, the associated investment authority and investor contributions will not count toward the limit on total investment authority and investor contributions set forth in subdivision (f) of Section 12265.(b) (1) The CPCFA shall first award reverted investment authority pro rata to each relief fund that was awarded less than the requested investment authority for which it applied under Section 12267 within 15 days, which a relief fund may allocate to the relief fund’s investors at the fund’s discretion.
(2) The CPCFA may award any remaining investment authority to new applicants.
12274.
(a) Each relief fund shall submit a report to the CPCFA on or before the first day of each April following the end of the calendar year that includes the closing date until the calendar year after the relief fund has been decertified. The report shall provide an itemization of the relief fund’s relief investments and shall include the following documents and information:(1) A bank statement evidencing each relief fund’s relief investments.
(2) The name, location, and industry class of each business that received a relief investment from the fund, evidence that the business qualified as a small business at the time the investment was made by a certification executed by an
executive officer of each business attesting that the business was a small business at the time of the initial relief investment in the business.
(3) (A) For each small business receiving a relief investment, the number of full-time employees at each small business at the time the investment was made.
(B) For purposes of this paragraph, a “full-time employee” means an employee that works at least 30 hours per week throughout the year or meets the customary practices accepted by an industry as full time. The number of a small business’s full-time employees is determined by dividing the total hours for which the small business pays wages to all employees during the year by the number of employee work hours per year. The standard calculation for employee work hours per year is 2080: calculated by multiplying 52 weeks by 40 hours per week.
(4) (A) A certification executed by an executive officer of each business attesting the number of jobs created and retained as a result of each relief investment.
(B) For purposes of this paragraph, “jobs created” means employment positions that are created by a small business, are located in this state, require at least 30 hours of work each week, and were not located in this state at the time of the initial relief investment in the small business. The number of jobs created by a small business is calculated each year by subtracting the number of employment positions in this state at the small business at the time of the initial relief investment in the small business from the monthly average of those employment positions for that year. If the number calculated under this subsection is less than zero, the number shall be reported as zero. The monthly average of
employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(C) For purposes of this paragraph, “jobs retained” means, employment positions that are located in this state, require at least 30 hours of work each week, and existed before the initial relief investment in the small business and would have been lost or moved out of this state had a relief investment in the small business not been made, as certified in writing by an executive officer of the small business. The number of jobs retained by a small business is calculated each year based on the monthly average of employment positions for that year. The monthly average of employment positions for a year is calculated by adding the number of employment positions existing on the last day of each month of the year and dividing that sum by 12.
(5) The number of jobs created and retained as result of each relief investment.
(6) The cumulative amount of relief investments made in each small business as a result of this credit.
(7) The number of relief investments made in impact businesses, disaggregated by classifications.
(8) A certification that the relief fund has not violated any of the grounds for revocation and recapture of credits set forth in subdivision (b) of Section 12267.
(9) Any other information required by the CPCFA.
(b) Each fund shall submit a report to the CPCFA on or before the fifth business day after the first and second anniversaries of the closing
date that provides documentation to prove that the fund has met the investment thresholds described in subdivision (b) of Section 12269 and has not implicated any of the other recapture provisions described in Section 12270.
12275.
The CPCFA shall undertake outreach activities to encourage investment in impact businesses, including, but not limited to, by partnering with organizations representing persons and business enterprises from underrepresented groups, in a manner that will inform and educate members of these organizations on investment opportunities through the program provided in this article.12276.
(a) (1) There is hereby established in the State Treasury the Treasury Relief Investment Fund. (2) All moneys appropriated to the CPCFA for purposes of this article shall be deposited or paid into this fund and shall be used only to carry out the CPCFA’s duties specified in this article and those rules and regulations promulgated to implement this article.
(b) CPCFA may direct the Treasurer to invest moneys in the fund that are not required for its current needs in the eligible securities specified in Section 16430 of the Government Code as the authority shall designate. CPCFA may direct the Treasurer to deposit moneys in interest-bearing accounts in state
or national banks or other financial institutions having principal offices located in the state. CPCFA may alternatively require the transfer of moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code. All interest or other increment resulting from an investment or deposit shall be deposited into the fund, notwithstanding Section 16305.7 of the Government Code. Moneys in the fund shall not be subject to transfer to any other fund pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, excepting the Surplus Money Investment Fund.
12277.
(a) The CPCFA may adopt regulations to implement this article. The adoption, amendment, repeal, or readoption of a regulation authorized by this section is deemed to address an emergency, for purposes of Sections 11346.1 and 11349.6 of the Government Code, and the CPCFA is hereby exempted for this purpose from the requirements of subdivision (b) of Section 11346.1 of the Government Code.(b) The CPCFA shall adopt forms and notices necessary to implement this article.
(c) The CPCFA shall notify the Department of Insurance of the name of any insurance company allocated tax credits under this article and the amount of those credits.